‘Military Inc’: African armies are big players in economies— with Ethiopia, Egypt top of the list

UGANDA’S army has announced a tie-up with a Chinese company to make explosives, which would then be sold both locally and to the East African country’s neighbours.

Egypt president Abdel Fatah al-Sisi unveils the ‘new Suez Canal’ in August 2015–it was as much about him as about the country.

The state-owned New Vision newspaper, quoting top Defence officials, last week reported that a planned factory would produce explosives for use in industries including mining, road and railway construction.

The venture is between the China Wanbao Engineering Corp. and Luwero Industries, which is owned by the Ugandan military and has been producing small ammunition for its own use, in addition to a clutch of other products from the army. But once the plant is operational, the deal would feasibly swell its coffers given the construction boom in the region, making the army a bigger player in the country’s economy.

It will also place it the league of a select African militaries that directly engage in business, by extension making them more invested in politics and partly explaining why some regional regimes survive, and others don’t.

Many are in industry— in aligned industries such as weapons production, and count countries such as Algeria, estimated to have the largest military budget on the continent.

But other militaries have branched out into the wider economy, accounting for significant holdings. Among them is the Metals & Engineering Corp (METEC), run by Ethiopia’s military which ranks among the continent’s top five by soldier ranks.

Set up in 2010 after 15 disparate businesses run by among others, the Defence ministry, were grouped together, it is essentially a conglomerate estimated to be running well over 50 factories and reporting directly to the country’s top leadership.

METEC is involved in various projects from electricity generation to machinery manufacturing and vehicle assembly, many in partnership with Chinese firms. The corporation is a key government pillar for diversifying one of Africa’s fastest growing economies, which runs on a centrist development model but is extremely reliant on agriculture.

‘National dam’

METEC has also been taking part in the construction of the Grand Renaissance Dam, a flaghip 6,000MW project that Ethiopia is building across a tributary of the Nile, having been contracted by state agency Ethiopian Electric Power Corporation. It is also set to finish work on at least three sugar factories this year, also with Chinese backing, and which would help turn the country’s fortunes around the commodity.

“Not only will we stop importing sugar, but we will start exporting [it],” Sugar Corp. spokesman Zemedkun Tekle said in a November 9 interview with news wire Bloomberg. The Ethiopian government is currently the only sugar producer in the country, and has set itself a target of becoming a top 10 global exporter by 2023.

But for overall economic value, Ethiopia’s military businesses would struggle to beat the grip of the army in Egypt. In July the North African nation to much fanfare unveiled the “new Suez Canal”—a 72-kilometre section expected to reduce congestion on one of the world’s busiest—and most lucrative— shipping lanes.

The new route involved 37 kilometres of dry digging and a similar distance of expansion and deepening the existing canal.

“By reducing the navigation time in the Suez Canal, your food, your medicine and your fuel will arrive faster. It will be Egypt’s gift to the world,” Suez Canal Authority chief Mohab Mameesh said at the time.

The new section was considered a “national project” that will help right Egypt’s listing economy following the upheaval of the 2011 revolution. But the striking thing was that it was completed dead on time—a rarity for projects of such magnitude in the continent, having cost about $8 billion.
The difference is that while it was funded by domestic investors, it was built by the army, and completed in just a year, instead of the budgeted three, reportedly on the orders of strongman Abdel Fatah al-Sisi, who hopes to gain politically from Egyptians hit hard by the economic downturn.

Happy soldiers

Despite apathy in recent elections, Sisi remains popular to many Egyptians tired of years of political turmoil. A former soldier in a suit, he will however also owe his longevity to keeping the military happy—a factor that is believed to have contributed to Hosni Mubarak’s 2011 ouster following moves to squeeze the role of the army in the economy.

The earning capacity of the Suez is this a mouth-watering attraction a military that already owns industries that hold huge sway in the economy, despite much of their operations being opaque. Military brass are said to be dabbling in everything from bottled water to the major infrastructure projects, and are present in almost every decision-making structure in the country. Their business activities have been estimated to be worth anywhere from 1%-6% of what is the third largest economy in Africa.

The army has also been accused of elbowing out private-run businesses, including through undercutting them owing to low overhead costs and zero taxation, in addition to “insider” advantages on bids.

The Egyptian model that to a less visible extent finds takers in countries like Angola and Zimbabwe, where liberation movements preside over a web of largely opaque companies that are direct players in the economy, with the former’s generals being particularly active in the reconstruction business following the civil war.

In August last year, President Robert Mugabe defended the involvement of the Zimbabwean military in business, saying their activities were contributing significantly to the country’s struggling economy and its long-term growth.

Peacekeeping windfall
It is not always the big visible projects. For small countries like Burundi, the military has become a major player in the economy through an unexpected route: peacekeeping. The country, lately in the news over fears of a complete break down in its social order following a disputed presidential election, has been one of the foremost troop-contributing nations to the African Union’s Somalia mission.

The monthly take home of a regular soldier is estimated at about $20; by serving in the mission this rose nearly 40 times. In one of the continent’s tiniest and poorest economies, Burundi soldiers have been in recent years been catapulted into the decidedly modest middle class, and one reason offered for the failed military coup earlier this year was the threat to this source of income following AU displeasure with the country’s leadership. In other words cutting out Burundi from the 22-000 string mission would sever a key source of income for the military.

For some militaries, the underground economy is more attractive—Guinea-Bissau’s status as a “narco-state” was on the back of its ever-present army, which was accused of aiding and benefiting from the illegal trade.

Guinea-Bissau has been plagued by coups since independence from Portugal in 1974 and the instability has attracted South American drug cartels using the country as a transit point to Europe.
In 2013, the head of the country’s armed forces, General Antonio Injai, was indicted by a US court on weapons and drug trafficking charges, two weeks after his ally, a former head of the navy José Américo Bubo Na Tchuto was arrested by American undercover detectives.

Some of the reasons offered for the involvement by the military in the economy are that they are more efficient and disciplined, but it is also not lost that they prop up many regimes in the continent, and they have to be kept well fed and occupied.